IE- 409 Oral Recitation 1. When production is lower than sales, which will get much of income increase Absorption Cost or Variable cost? Why? - When units produced equals units sold, profit is the same for both costing approaches. - When units produced is greater than units sold, absorption costing yields the highest profit. - When units produced is less than units sold, variable costing yields the highest profit. 2. What is the difference between Journal Entry and T-accounts? - First, these debit and credit entries are posted into the journal, as a journal entry. Then, the journal entry is moved into the ledger, in the form of a T account. Each T account carries the debit and credit entries for a different type of account, such as accounts receivable, cash, sales revenue, and so on. 3. Differentiate the three classes of inventory? - Raw Materials (raw material for making finished goods) Work-In-Process (items in the process of making finished goods for sales) and Finished Goods (available for selling to customers) 4. What is income statement? - A financial statement that shows you the company's income and expenditures. It also shows whether a company is making profit or loss for a given period. 5. Tell anything about degree of operating leverage? - A measure of how sensitive net operating income is to percentage changes in sales. 6. Elaborate something about underapplied and overapplied overhead? - Underapplied overhead occurs when overhead expenses are more than what a company actually budgets. Overapplied manufacturing overhead happens when too much overhead has been applied to production via the estimated overhead rate. 7. The timing charges against sales revenues? - Product Cost and Period Costs 8. What is marginal revenue? - Revenue that can be obtained from selling one more unit of product is called Marginal Revenue. 9. Tell something about processing department? - Any location in an organization where materials, labor or overhead are added to the product. The activities performed in a processing department are performed uniformly on all units of production. Furthermore, the output of a processing department must be homogeneous 10. What is reciprocal method? - The reciprocal method gives full recognition to interdepartmental services. Under the step-down method discussed above only partial recognition of interdepartmental services is possible. The step-down method always allocates costs forward—never backward. The reciprocal method, by contrast, allocates service department costs in both directions. 11. What is Margin of Safety? - The margin of safety is the excess of budgeted (or actual) sales over the breakeven volume of sales. 12. What is accounting? - Accounting is the process of systematically recording, measuring, analyzing and communicating information about business/financial transactions of an entity. 13. Give example of mixed cost? - Utilities, internet or telephone bill 14. The three (3) cost classification on financial statement? - Balance Sheet, Income Statement, and Schedule of COGM 15. What is debit and credit? - A debit is an accounting entry that either increases an asset or expense account, or decreases a liability or equity account. It is positioned to the left in an accounting entry. - A credit is an accounting entry that either increases a liability or equity account, or decreases an asset or expense account. It is positioned to the right in an accounting entry. 16. What are the two ways to analyze break-even? - Equation Method and Contribution Margin Method 17. What is contribution margin? - Contribution Margin (CM) is the amount remaining from sales revenue after variable expenses have been deducted. 18. What is the Job-order costing? - A job-order costing system is used in situations where many different products are produced each period. It is also used extensively in service industries. 19. Give one distinction between Financial Accounting & Managerial Accounting? - Primary Users - Content of Reports - Regulatory Compliance - Time focus - Relations with other disciplines 20. What is incremental cost? - The incremental cost is the difference in costs between two or more alternatives. 21. Tell something about Just In Time inventory system? - JIT is a form of inventory management that requires working closely with suppliers so that raw materials arrive as production is scheduled to begin, but no sooner. The goal is to have the minimum amount of inventory on hand to meet demand. 22. Differentiate the Prime cost & Conversion cost? - The calculation for prime cost includes the total amount spent on direct materials in addition to direct labor. Tangible components such as raw materials necessary to create a finished product are included in direct materials. Conversion costs include direct labor and overhead expenses incurred due to the transformation of raw materials into finished products. 23. Difference between Absorption Cost and Variable cost? - Absorption Costing – Fixed manufacturing costs must be assigned to products to properly match revenues and costs. - Variable Costing – Fixed manufacturing costs are capacity costs and will be incurred even if nothing is produced. 24. The two income statement format? - Traditional Format and Contribution Format 25. Give example of controllable and noncontrollable costs? - Controllable costs are things the executive, manager, or department even can control or change. Common examples of controllable costs are office supplies, advertising expenses, employee bonuses, and charitable donations. Controllable costs are categorized as short-term costs as they can be adjusted quickly. - Non-controllable expenses tend to be fixed in nature and cannot usually be changed within the normal rhythm of business (or fiscal year) and include costs under the following categories: Occupancy Costs (Rent, building insurance, real estate and property taxes, equipment leases, etc.) Depreciation & Amortization. 26. What is the non-manufacturing cost? - Non-manufacturing costs (or operating expenses) are costs that are not related to the production of goods. It is subdivided into selling expenses and general and administrative expenses. 27. Differentiate Financial Accounting & Managerial Accounting? - Financial Accounting – A branch of accounting that organizes accounting information for presentation to interested parties outside of the organization. - Managerial Accounting – A branch of accounting that deals with how accounting data and other financial information will meet the information needs of management. 28. Give one example of cost of quality? - Internal Failure Cost - External Failure Cost - Quality Conformance - Prevention Cost - Appraisal Cost 29. What are the three costs under the manufacturing cost? - Manufacturing costs fall into three broad categories of expenses: direct materials, direct labor, and manufacturing overhead 30. The various classification of costs? - Variable Cost, Fixed Cost, and SemiVariable Cost (Mixed Costs) 31. What is break-even point? - The breakeven point is the level of production at which the costs of production equal the revenues for a product. 32. What is cost? - Cost is defined as a measurement, in monetary terms, of the amount of resources used for some purposes. - There are different types of costs used for different purposes Some costs are useful and required for inventory valuation and income determination. Some costs are useful for planning, budgeting, and cost control. Still others are useful for making short-term and long-term decisions. 33. Difference between product cost and period cost? - Product costs are inventoriable costs, identified as part of inventory on hand. They are therefore assets until they are sold. Once they are sold, they become expenses, i.e., cost of goods sold. - Period costs are not inventoriable and hence are charged against sales revenue in the period in which the revenue is earned. Selling and general and administrative expenses are period costs. 34. What is the process costing? - It is used in situations where the company produces many units of a single product for long periods. - Process costing systems accumulate costs in a particular operation or department for an entire period (month, quarter, year) and then divide this total cost by the number of units produced during the period. 35. Tell something about cost volume & profit relationship? - Cost-volume-profit (CVP) analysis is a way to find out how changes in variable and fixed costs affect a firm's profit. Companies can use CVP to see how many units they need to sell to break even (cover all costs) or reach a certain minimum profit margin. 36. Explain something about Job Cost Sheet? - A job cost sheet is a form prepared for a job that records the materials, labor, and manufacturing overhead costs charged to that job. 37. What will happen if you deduct period expense from gross margin? - Net income is the profit that remains after all expenses and costs have been subtracted from revenue. 38. Give the costs under manufacturing overhead? - Indirect materials - Indirect Labor - Maintenance & repairs - Utilities - Taxes, depreciation & insurance 39. What is the Labor-fringe benefits? - Labor fringe benefits are made up of employment-related costs paid by the employer and include the costs of insurance programs, retirement plans, various supplemental unemployment benefits, and hospitalization plans. 40. Enumerate the three section of production report? - A quantity schedule showing the flow of units and the computation of equivalent units. - A computation of cost per equivalent unit. - Cost Reconciliation section shows the reconciliation of all cost flows into and out of the department during the period. 41. Differentiate the 2 cost by management function? - Manufacturing cost – Manufacturing costs are those costs associated with the manufacturing activities of the company. - Non-manufacturing cost – Nonmanufacturing costs (or operating expenses) are subdivided into selling expenses and general and administrative expenses. 42. What is the resulting cost term of Manufacturing Cost & Beginning & Ending Work In Process Inventory? - Cost of Goods Manufactured (COGM) 43. What is opportunity cost? - It is the potential benefit that is given up when one alternative is selected over another. 44. The major 4 consideration for work management? - Planning - Coordinating - Controlling - Decision Making 45. Why managers needs accounting? - For Planning & Decision Making - For Performance Evaluation & Control - For Cost Management - For Cost Determination 46. What is equivalent units of production? - Equivalent units are the product of the number of partially completed units and the percentage of completion of those units.
